Are you buying a home for the first time? 

You must be thinking of gathering an amount for the down payment. Or you might be anxious about getting a loan. Then comes the interest rates, margin, loan amount, and more.  

Yes, buying a home is a time-intensive and stressful process. However, it does not have to take forever. But don’t worry. First time home buyer loan benefits will cover all those anxieties you have.  

The currently available benefits for first-time home buyers will take you one step closer to your dream…of the dream home. 

What are the Benefits of First-Time Home Buyers’ Loans? 

What are the Benefits of First-Time Home Buyers' Loans_

The first benefit is the deduction on the home loan interest paid.  

Deduction on the Home Loan Interest Paid 

Buyers can claim a tax deduction of ₹50,000. This comes under the Income Tax Act of 1961 (Section 80 EE). This deduction is over and above the limit of₹200000 available currently under Section 24.  

I know that it is exciting news. But relax. There are certain criteria to meet before you are eligible for the benefits.  

  • The additional deduction applies only to the loan’s interest portion, which is seen as a self-occupied property. 
  • Remember, this benefit is exclusive to first-time homebuyers only.  
  • The house’s value is less than ₹5000000, and the loan taken must not be more than ₹3500000. This means that the benefits only find people who need it the most.  
  • The home loan had to be sanctioned between April 2016 and 31st March 2017. 

Can you check all the boxes here? If yes, good news for you: you are eligible for the home. 

If You are Not Getting an HRA… 

So, you don’t get any HRA from your employee? But should that be a problem? 

No. The Section 80GG under which home buyers can get some tax benefits. The maximum deduction you can claim is ₹60,000 per annum.  

But here, again, there is another criteria to meet. You have to be a salaried employee or self-employed?  

Are you one of them? If you meet these criteria, then there is good news for you. You are eligible for these tax benefits.  

Pradhan Mantri Awas Yojana 

Pradhan Mantri Awas Yojana is the most known and heard of the Government Subsidy & Incentives program in India. It started with the government’s initiative to secure “housing for all.” 

The PMAY has started to support the lower and mid-range income brackets in India. The PMAY exists to ensure that these people receive some tax breaks when purchasing a house. 

However, before you receive any of the benefits, you must meet certain prerequisites such as – 

  • An additional deduction is allowed for interest on loans gained for real estate property used for self-occupation.   
  • This advantage is only available to first-time home buyers, and the annual extra benefits are limited to ₹500000.  
  • The house should have only a price below 50 lakhs, and the loan should not be more than 35 lakhs.  

The government categorizes these three income brackets as the EWS( economically weaker section), LIG ( Lower Income Group), and Middle Income Group (MIG). Based on these different income brackets, there is a limit to how much subsidy each of the income brackets is eligible to receive. 

Income Group Maximum Carpet Area Max Interest Subsidy Max. Loan Amount Home Loan tenure 
EWS 60 sq.m 6.5% 6 Lakhs Not defined 
LIG 160 sq.m 4% 9 lakhs 20  
MIG 200 sq.m 3% 12 lakhs 20 

Here is how you will define the income groups – 

Income Groups  Maximum Carpet Area of House  
EWS: Annual Income – up to INR 300000 30 sq.m 
LIG: INR 300001 to 600001 60 sq.m 
MIG: INR 600001 to 1200000 160 sq.m 

Deduction on GST 

There was a 12% subsidy levied previously on houses that were acquired under the PMAY. But the good news is that it has been reduced to 8% since 2018. This suggests that first-time home buyers with an average earning of around 18 lakhs will enjoy a 2.7 lakh worth of benefits. This is more compared to the early benefit of 2.5 lakh rupees enjoyed earlier.  

Deduction on the Subsidy slabs 

Home buyers who have an annual income of 12 lakhs can claim a 4% subsidy on the principal amounts of rupees 9 lakhs. On top of that, a subsidy is extended to 12 lakhs in principal sum for people earning a salary of around 18 lakhs.  

Prepare for Your Home Buying Journey 

Prepare for Your Home Buying Journey

Here is how you can prepare for your financial journey to buying your new home; and yes, that includes using the first time home buyer loan benefits.  

Take Your Finances in Check 

You have a dream of the dream home, and the first thing you do is go through different property listings. Those house walk-throughs shown on Instagram and YouTube are fine. However, what you really should be worried about at first is your financial health. Go ahead and ask yourself a few of these questions – 

  • How will you pay the monthly EMIs?  
  • Do you have enough savings to pay the down payments?  
  • Is your finances strong enough to withstand the risk of a home loan?  

There, you are already on the right track if all these questions point in the right direction. Now, let’s shop around a little.  

The Best Deal

If you want to get the best option for first-time home buyer loans, you have to shop around a little. Check the interest rates of different lenders and compare both their benefits and downsides. If you shop around, you will get to know their benefits, check the interest rates, and more, which will finally help you choose the right loan provider.  

Once you are done shopping around, you will find the lender best suited for you. After that, try using the loan EMI calculator. This should help you calculate the EMI amount that you have to pay against your home loan.  

Yes, you have arrived at the assessment part. You have the numbers you are likely to pay on a monthly basis. So, are you ready? Is this the EMI you were hoping to pay?  

Use the Housing Schemes 

As discussed above, the PMAY is here to help first-time homebuyers find solutions to their home-buying needs. You can get help from the Credit Linked Subsidy Scheme provided by reputed lending institutions on home loans. This is to remember that the interest rates are available to first-time homebuyers only. Also, first time home buyers do not have to worry about paying the processing fees.  

Work on Your Savings 

Buying a house becomes easier when you have enough savings, especially to meet the down payments. But it does not end there. The loan EMIs are coming after you as well. So, you must have a substantial amount of money for a downpayment, an emergency situation, and the first few installments of your EMI. Usually, the sellers would want you to pay the first 10% or 25% of the house’s price as a down payment. So, it is important that you have enough savings to back up that cost. 

Do not Settle for a Longer Repayment Period 

The loan repayment period should not be too long. Of course, longer repayment tenures will reduce the monthly payable amount for the EMI.  

But the longer you take to repay your home loans higher the amount you have to pay in interest. Don’t go for extremely shorter repayment tenures as well; because that will increase the monthly burden of EMI on you.  

Go Under Budget 

If you want to complete this entire journey without losing a fortune, it’ll be best to stay under budget. I know that some flashy interior designs and exteriors with lots of amenities might be intriguing. But you have to work your way around it. Try looking for properties that come with all the most important amenities and are priced reasonably. This way, you won’t be straining your pocket while also getting everything you need in the house.  

Can I Buy a Home with Zero Down Payment in India? 

If you want to buy a home, you can do so with a home loan. But you cannot buy a house with a 100% home loan. Most lenders will ask you for a portion of the property value as per the guidelines of RBI. Usually, this portion is around 20% of the property value. No financial institution grants 100% loans on houses that you want to buy. 

Final Words 

As a home buyer, if you want to enjoy the first-time home buyer loan benefits, you must first know what those benefits are. The current article lists the benefits that you will enjoy as a first-time home buyer in India. However, you must also meet the different criteria and conditions attached to the schemes and benefits provided by the Indian government. Hopefully, you find your answer in this article. Do share your opinions in the comment section. Thank you for reading.

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